PHILADELPHIA ENERGY SOLUTIONS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands, except unit and volume data)
The costs incurred in connection with major maintenance turnarounds are capitalized as property, plant, and equipment when incurred and
depreciated over the period benefited by the maintenance activities.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be recoverable. An asset is considered to be impaired when the undiscounted cash flows expected to be generated by the asset are less than its carrying amount. The impairment recognized is the amount by which the carrying amount exceeds the fair
value of the impaired asset. Fair values are determined by a variety of valuation methods, including appraisals, sales prices of similar assets and present value techniques. Impairment assessments inherently involve judgment as to assumptions about
expected future cash flows and the impact of market conditions on those assumptions. Although management would utilize assumptions that it believes are reasonable, future events and changing market conditions may impact managements
assumptions, which could produce different results. The Company recorded no impairment of long-lived assets for the years ended December 31, 2015, 2014, and 2013.
Commitments and Contingencies
Company enters into commitments for purchase of both crude and refined products as part of normal operations. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when
it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Recoveries of environmental remediation costs from third parties are
recorded as assets when receipt is deemed probable.
Environmental remediation costs are accrued where an assessment has indicated that cleanup costs are probable and reasonably estimable. Such
accruals are undiscounted and are based on currently available information, estimated timing of remedial actions and related inflation assumptions, existing technology, and presently enacted laws and regulations. If a range of probable environmental
cleanup costs exists for an identified site, the minimum of the range is accrued. The actual settlement of environmental remediation costs could materially differ from our estimates due to a number of uncertainties such as the extent of
contamination, changes in environmental laws and regulations, potential improvements in remediation technologies and the participation of other responsible parties.
The Company has entered into an agreement with Sunoco that provides indemnities to the Company for remediating contamination that occurred at
the Philadelphia refining complex prior to September 8, 2012. Accordingly, the Company recorded a corresponding receivable from Sunoco for all liabilities recorded which are subject to the indemnity as of December 31, 2015 and 2014.
The Company has not incurred material liabilities or obligations subsequent to September 8, 2012.
to time, the Company uses swaps, futures, forwards, and other derivative instruments to hedge a variety of price risks. All derivative financial instruments are recorded in the consolidated balance sheets at their estimated fair value. For balance
sheet presentation purposes, the Company offsets asset and liability fair value